INTRODUCTION
India’s import and export system is governed by the Foreign Trade (Development & Regulation) Act of 1992 and India’s Export Import (EXIM) Policy.Import and export of all goods are free, except for the items regulated by the EXIM policy or any other law currently in force. Registration with regional licensing authority is a prerequisite for the import and export of goods. The customs will not allow for clearance of goods unless the importer has obtained an Import Export Code (IEC) from the regional authority.
Import Policy
The Indian Trade Classification (ITC)-Harmonised System (HS) classifies goods into three categories:
- Restricted – Restricted items can be imported only after obtaining an import license from the relevant regional licensing authority.
- Canalized- Canalized goods are items which may only be imported using specific procedures or methods of transport.
- Prohibited – These are the goods listed in ITC (HS) which are strictly prohibited on all import channels in India. These include wild animals, tallow fat and oils of animal origin, animal rennet, and unprocessed ivory.
Export Policy
Just like imports, goods can be exported freely if they are not mentioned in the classification of ITC (HS). Below follows the classification of goods for export:
- Restricted – Before exporting any restricted goods, the exporter must first obtain a license explicitly permitting the exporter to do so.
- Prohibited – These are the items which cannot be exported at all. The vast majority of these include wild animals, and animal articles that may carry a risk of infection.
- State Trading Enterprise – Certain items can be exported only through designated STEs. The export of such items is subject to the conditions specified in the EXIM policy.
BRIEF HISTORY
Import and Export Policy during 1948-52:
During the immediate post-independence period (1948-52), a restrictive import policy was followed towards Dollar areas because of the existing Dollar scarcity in the country but the export policy remained the same so that inflow of dollar increases.
- Import Policy in First Plan:
During the First Plan, the government adopted a liberal import policy, resulting in large imports of consumer goods and capital goods. This led to foreign exchange crisis in the country.
- Import and Export Policy in Second Plan:
Due to unprecedented rise in imports during 1956-57 and 1957-58, the government was forced to impose restrictions on imports, particularly of consumer goods and various new methods of production and promotion of exports as the price of dollar was rising.
- Mudaliar Committee (1962):
On the recommendations of the Import and Export Policy Committee (1962) headed by Mr. Mudaliar, the import policy was broadened. The Committee recommended that- (a) facilities should be provided for the import of maintenance and developmental goods which are essential for the development of industries; and (b) priority should be given to the new industries, particularly the import substituting industries and export-oriented industries.
Important Judgement
Neelam Imports vs Union Of India And Ors
The main issue involved in the following case is with regard to the question of provisional release of the goods which are essentially LED lights and Christmas. The goods were imported by the petitioners, who were the Import Export Code (IEC) holders and the petitioners had also filed the bills of entry. However, the goods were detained by the customs authority on the ground that the goods belong to one Mr Amarnath Jindal and that the petitioners allegedly have an agreement with him for which they get a fixed amount for the imports. The sum and substance of the allegation is that the imports are being made by the said Mr Amarnath Jindal used Import Export Code(IEC) of the petitioners. It is for this reason that the respondents contend that the goods are prohibited.
On the other hand Mr Ganesh, the learned senior counsel appearing on behalf of the petitioners, submits that the goods are not in the category of „prohibited goods‟. They are freely importable on payment of customs duty. Whatever customs duty is payable, the petitioners are ready and willing to pay the same. In fact, there is no controversy on the amount of the duty payable on the said subject import. He further submits that the goods have been imported by the petitioners, who have filed the bills of entry and they are the owners of the goods. He further submits that even if they are not the owners of the goods, there is nothing to prohibit the import of the said goods. He placed reliance on the judgment of the Kerala High Court in the case of Proprietor, Carmel Exports and Imports v. CC, Cochin: 2012 (26) ELT
The judgement concluded that in view of the foregoing, they saw no reason as to why the provisional clearance should not be granted by the customs authorities in respect of the goods which are the subject matter of the present petitions. Thus they directed the Commissioner of Customs, ICD, Tughlakabad, New Delhi to provisionally clear the said goods, subject to the conditions that he may impose in accordance with law.
COMPARISON WITH REST OF THE WORLD
The basic concept of laws and policies of import and export varies from country to country as the duty imposed on the goods serve as a source of additional income to the countries. The best example of the variation between the laws and policies of import and export of different countries can be represented by Philippines and India as the Philippines Customs apply a value added tax (VAT) for imported goods at 12 percent, the Philippines’ customs levy no tariff or tax for goods worth less than P10,000 (US$200) and the only exported good which incur a tariff are logs at 20 percent whereas the Indian policies of import and export are extremely different.
SUGGESTIONS
This is probably one of the most troubled times for exporters almost anywhere in the world. Whether because of political considerations or because of pandemic-induced lockdowns, more and more nations seem to have withdrawn into protectionist shells. India, now more than ever, needs a robust Foreign Trade Policy (FTP) that can tackle the new normal while nations struggle to deal with a covid-19 pandemic and economic downturn.
The existing FTP, which was due to end in March 2020, was extended in light of the pandemic till 31 March 2021. It’s now time for a new FTP to be framed.
India does have a scheme in place to encourage exporters. The EPCG (Export Promotion Capital Goods) allows duty-free import of capital goods on condition that at least a part of it is used to produce goods for export. However, the scheme has not been as successful as envisaged.
The problem may lie in the low penalty imposed on companies that do not meet their export obligation. Reports say that there are cases of intentional default, where companies find that it’s cheaper to import under the EPCG even after considering government-imposed penalties. That defeats the objective of the scheme, which is to increase exports. The new FTP should either strengthen the existing scheme or revamp it to promote exports.
The existing FTP focuses on the Merchandise Exports from India Scheme (MEIS) — an amalgamation of previous export promotion schemes. The MEIS is essentially an incentive scheme, where exporters receive duty credit scrips for a percentage of the value of the goods exported. These scrips can be used to pay a variety of taxes and duties.
Written by
Manan Ranka
